Sprint Nextel Corp.’s $17.5 million settlement over early termination fees was vacated by a U.S. appeals court that said the accord didn’t adequately protect class members who didn’t sue.

Five customers of Overland Park-based Sprint sued in November 2007, alleging flat-rate early termination fees, or ETFs, of as much as $200 charged by the mobile phone company were illegal and violated state consumer protection laws.

The parties reached a settlement in December 2008, and a trial court judge approved the accord in January 2010 after overruling objections from several class members. The lower court erred in its decision, a three-member panel of the Philadelphia appeals court said in a ruling Friday.

“With full appreciation for the considerable efforts that have been invested in the settlement of this class action, we emphasize again the judicial duty to act as the guardian of absent class members,” the panel said in its opinion.

Sprint said in a statement Friday that it was reviewing the court opinion to determine its next steps. The company declined further comment.

The wireless industry has come under increased regulatory scrutiny over fees and contract terms.

Under the settlement reached in 2008, Sprint agreed to pay $14 million in cash and $3.5 million in activation fee waivers, bonus minutes and credit forgiveness. The company also agreed not to include flat-rate ETFs in new fixed-term subscriber agreements for two years, starting in 2009.